San Juan Capistrano water customers to get refunds for tiered rates

San Juan Capistrano, California –

Water customers in San Juan Capistrano who were charged under a pricey tiered system declared illegal can get their money back under a new refund process.

Anyone who paid for water under the top three of four tiers between Aug. 28, 2013, and June 30, 2014, is eligible for a refund or credit on future bills under the system approved Tuesday night by the City Council. The period covers from when an Orange County Superior Court judge ruled the tiers to be illegal to when the city implemented new prices last summer.

The new rate system includes tiers, but they’re not nearly as steep before: top users paid $11.67 per 100 cubic feet of water under the old rates; they pay just $5.15 now.

How much the refunds will cost the already cash-strapped city is unclear. City staff are preparing a report for the June 16 meeting that will include a projection and information on a formal application process.

That prompted Councilman John Perry, one of two residents who sued before he was elected, to vote against the refunds because he wanted to know how exactly they will be calculated.

“By any measure, they deserve every penny extra that they are forced to pay by the city,” Perry said.

The refund process comes as people like Eric Krogius, a Cota de Caza resident who used to live in San Juan Capistrano, have filed small claims to recoup the money they paid for the heavy tiers.

Krogius, who is U.S. Rep. Mimi Walters’ brother, said Wednesday he doesn’t plan to drop the claim he filed last month in Superior Court. And he said he still wants the money back he paid under the tiers prior to Aug. 28, 2013. His court hearing is scheduled July 13.

“I’m going to take it all the way to the end, and we’ll let the judge decide if they can arbitrarily decide that that’s the date,” Krogius said.

The city already is in a tight financial position. Years of unrelated litigation drained funds so much that when an appellate court in 2010 ordered the city to pay $6.35 million to a landowner over a development dispute, the city paid for about half of it by increasing property taxes in 2011 for the next 10 years.

City documents presented to the council Tuesday say the water rate refunds will increase a deficit in the city’s water budget that’s already expected to be at least $1 million by June 30, which is the end of the fiscal year.

It’s not the first time San Juan Capistrano’s water revenue hasn’t kept up with expenses: The city has supplemented that aspect of the budget for years. One of the biggest financial factors is a struggling groundwater recovery plant for which the city owes more than $40 million. Jim Reardon, who also sued the city, and Perry have long said they believe the water rates were artificially inflated to cover the enormous cost of the plant.

But city documents didn’t show how the rates related to the actual cost of water in San Juan Capistrano. That’s where the city ran into trouble: Proposition 218, enacted by voters in 1996, requires all government fees be set in accordance with cost. Reardon and Perry had long told the council the city water rates didn’t do that.

The 4th District Court of Appeal’s April 20 affirmation of the August 2013 Superior Court ruling attracted international attention and was criticized by Gov. Jerry Brown. The court was careful to emphasize that tiers in general aren’t illegal, but arbitrary tiers are.

But so many municipal agencies use tiered systems that the ruling has caused a scramble to ensure compliance and fend off more litigation. Last week, a class-action lawsuit was filed in Marin County over the tiered water rates there.

Contact the writer: 949-492-5122 or mcuniff@ocregister.com On Twitter: @meghanncuniff.